The ratings on Delray Beach, Fla.-Office Depot Inc. reflect the highly competitive operating environment, some regional concentration in the its North America store base, and weaker operating margins that are well below those of Staples Inc., the industry leader. Furthermore, Office Depot's store base is around 30% smaller than Staples' North American store base, its operating margins are more than 500 basis points lower than Staples', and its stores also face greater direct competition in more markets. The company's solid market position in the North American office products industry (second to Staples) and its diverse channels of distribution are somewhat offsetting. Operations have come under pressure due to extremely challenging economic conditions and the weak housing market, which have contributed
